Schaeffler announces ‘painful’ closure of ICE-based plant
09 December 2021
Automotive supplier Schaeffler will shut down its German Luckenwalde site, which is heavily focused on producing parts for internal-combustion engine (ICE) vehicles. The company cited challenging market conditions, saying ‘structural adjustments’ were inevitable.
The location has seemingly lost significance for Schaeffler as it increasingly shifts its focus to electromobility. It said Luckenwalde’s product and component portfolio was ‘at the end of its lifecycle’ and will now be gradually closed, with activities relocated by July 2023.
The company was unable to reach an agreement on alternative solutions with employees despite engaging in extensive negotiations for well over a year. It now plans to commence negotiations on reconciliation of interests.
Structural measures ‘essential’
‘The closure of the Luckenwalde location is painful for all involved,’ said Corinna Schittenhelm, Schaeffler’s chief human resources officer. ‘Our focus now is on coming to the most socially responsible solution possible in negotiations with the employee representatives for Luckenwalde that are due to start as soon as possible.’
Schaeffler announced structural measures in September 2020 in an effort to stay competitive and transform the group. These mainly affect 12 of the company’s German locations, at 11 of which it was able to secure agreements with employee representatives on capacity reduction and consolidation.
The German supplier said the transition to electric mobility has left its automotive-technologies division in a difficult market environment, arguing that structural adjustments and consolidation of locations are essential. The company aims to offer many of the 330 employees at its Luckenwalde site possible employment at other locations.
‘We have held extensive discussions with the local employee representatives over the past 15 months,’ said Matthias Zink, CEO automotive technologies of Schaeffler. ‘Although both sides did their best we did not come to a common solution in the end, much to our regret.’
The works council in Luckenwalde does not comprehend the decision to close the location, saying the site is profitable. ‘The Schaeffler board of management sees the products in Luckenwalde for the ICE as being phased out in the long term,’ said the deputy chairman of the general works council, Ulrich Schoepplein. ‘We are watching with concern that new products in the process of transformation are predominantly located to Eastern Europe,’ he added.
Local politicians were also concerned about the closure, with Brandenburg’s economics minister Jörg Steinbach telling German publication Stern that he is expecting Schaeffler and employee representatives ‘to conduct the upcoming talks on the reconciliation of interests and the social plan in a fair manner.’
Last year, Schaeffler announced a package of measures, aiming to downsize and consolidate locations, while also bolstering competitiveness. The plans include a net workforce reduction of 4,400 in Germany and Europe by the end of 2022. The company justified its decision, saying market and revenue projections for the years leading up to 2025 point to a slow recovery. The industry has been hit hard by COVID-19, with Schaeffler not expecting a return to pre-crisis levels until 2024 at the earliest.
The structural measures could lead to potential annual savings of €250 to €300 million, of which 90% will likely be realised by 2023. At the same time, Schaeffler expects ‘transformation costs’ to amount to €700 million, with the company also planning to reinvest in growth areas of business and technology in Germany. Several sites in the country – including Herzogenaurach, Bühl, Schweinfurt, Langen, and Höchstadt – will profit from this as the supplier aims to strengthen certain locations by clustering technology and production capabilities. The firm is particularly eager on investing in hydrogen and electromobility technology in the future.